Agriculture Reforms India 2020

The Background

India is a land of farmers, which can be understood by the fact that the former Late Prime Minister of India Mr. Lal Bahadur Shastri in 1965 gave the famous slogan of “Jai Jawan Jai Kisan”. This slogan pays respect to the farmers of India who are regarded as “Ann Daata” and the great soldiers who protect countries' borders. Agriculture has been the largest contributor to the GDP say more than 50% of the Indian economy at the time of independence. Slowly and gradually its supremacy was taken away by the Secondary Sector and now it is the least contributor to the country’s GDP. Indian agriculture is known for its smallholdings and fragmented poor farmers! These farmers primarily have subsistence farming and could barely make some money. Furthermore, Indian agriculture is also heavily dependent upon rain because of very poor and old technology for irrigation facilities. At the same time, the farmers have a very tough time because of the natural calamities like floods and drought are major ones to quote. The worst scenario w.r.t. the farmers is that they do not have a right to decide the price of their produce, no right to sell their produce wherever they want and to who so ever they want, cannot get into any agreement with anyone i.e. in terms of capital market cannot get into futures agreement. Hereby, these small farmers were forced to sell their produce to middlemen who runs a well – developed and established nexus. The poor small farmers were not even facilitated to sell their produce at any wholesale market because the established members of these markets do not allow them to do so. Also, forget about selling it in the retail market. As a result, the poor farmer gets poorer and debt-burdened, to an extent where he has to commit suicide! The NCRB data shows an average of more than 10 suicides per day in the country of farmers! Indian farming at large is still primitive in nature, it's only large farmers of Punjab, Eastern UP and some areas of East and South India are using the latest technology like HYV seeds, harvesters, etc. Farmers are also in the country are illiterate at large which again contributes to their ordeal. Therefore, the Indian farmers or agriculture industry has been waiting for the reforms for ages to end this misery and pain of these farmers.

The Scenario

The Government of India under of current leadership finally finished one of the most sought reforms awaited i.e. the Agriculture reforms in the form of “Farmers (Empowerment and Protection) Bill, 2020 in short, is also known as “Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Service Bill, 2020. Through this bill, the current GoI has a vision where poor and small farmers of India will no longer commit suicide and rather contribute more to the Indian economy through the usage of state of the art technology being used in the developed economies by the help of the state and the corporates!

The table below shows the various reasons to which a farmer in India commits suicide:

Source: Panagariya, Arvind (2008). India. Oxford University Press. p. 153. ISBN 978-0195315035

The reform in the form of the bill has the following aspects w.r.t. the farmers:

1. The Farming Agreement:

   a. Farmer is now a price maker on the following counts:

   i. Now a farmer can enter into a contract i.e. futures contract for its produce, with an individual and / or corporate, subject to;

   1. Validity of term is for a minimum period of one crop season or one production cycle of livestock, with a maximum period of 5 years. If the period is more than 5 years than it shall be decided mutually in between the farmer and the buyer.

   2. Agreement must be entered into a written document form with the following guidelines as laid down by the Central Government.

   3. The agreement will focus only on produce as agreed with the specifications mentioned i.e. quality, grade and quantity, etc with timely delivery, as per section 4.

   4. On failure of delivery cannot be recovered from the land of the farmer. Thus, the farmer remains the owner of the land.

   5. No farming agreement shall be entered into by a farmer under this agreement section 3 subsection 2, in derogation of any rights of a sharecropper.

   6. Thus, there is a guaranteed price to be paid for the produce, as advocated under section 5.

   ii. Electronic platforms to be made available to the farmers and to be used by them

   iii. Section 6 of the bill states that the buyer, shall make two-third of the payment at the time of delivery and remaining at the time of due certification i.e. receipt slip of sale or maximum within 30 days of such issue of the certificate.

   iv. Section 7 lays down that such agreements are exempted from any state Act that regulates the sale and purchase of farm produce. Also, sections that such agreements notwithstanding with any provision of Essential Commodities Act 1955.

   v. Section 8 (a) states that no agreement can be done w.r.t. an act that takes away the ownership of the of land from the farmer. Further, subsection (b) states that buyer cannot make any permanent structure or modification on the farmers land unless the buyer commits to remove such structure at his or her cost at the termination or expiry or conclusion of the agreement.

   vi. Section 9 says that such agreement shall be linked with any insurance or credit scheme being launched by the Central or State Government for the aid of farmer or the buyer or both.

   vii. Section 10 introduces the Aggregators (i.e. any person or farm production organisation) or Farm service providers can be included in the agreement but with specified roles, responsibilities and services to be performed.

   viii. Section 11 states that such an agreement can be rescinded at any point in time.

   ix. Section 12 tells about the Registration Authority to be notified by a State Government for electronic registration of such agreements.

2. Dispute settlement mechanism

   a. Section 13 to 15 describes the dispute settlement mechanism.

   b. Every such agreement has to be a conciliation clause so that in case of disputes, the matter shall be sent to the conciliation board which shall be comprised of a fair and balanced representation of parties.

   c. These sections have empowered SDM to settle such disputes, if not settled in the abovementioned point. Such orders have the same force as being passed by a competent Civil Court under the Code of Civil Procedure (CPC) 1908.

   d. The bill has barred the Civil Courts to entertain such disputes. But an appeal can be raised to the Appellate Authority as prescribed by the Central Government.

3. Other clauses

   a. Section 16 to section 25 explains the various other aspects like;

   i. Powers of Central Government to issue guidelines.

   ii. All authorities like, Registration Authority, SDM, etc are to be covered as Public Servant under Section 21 of IPC.

   iii. Section 18 bars all suits, legal proceedings, or prosecution of any nature against Central and / or State Government and Authority(s) acted being Bonafide i.e. acted in good faith.

   iv. Bar of jurisdiction of Civil Court.

   v. This bill to override any law of State established being inconsistent with this bill.

   vi. This bill is not applied to the Stock Exchanges and Clearance Corporations.

Thus, the above highlights clearly show how the farmer and the Indian economy is going to be benefitted in the following aspects:

1. Allowing of intra and inter-trade of farmers produce.

2. Electronic platforms to be used for farmers produce trade.

3. Trade can be done outside the physical premises of the market as per the APMC Act.

4. Trade can take place outside the farm area, thereby a farmer can sell it produce anywhere now.

5. Farmer is now a price maker of its produce.

6. Market fees have been abolished and therefore, free access to market pan India by a farmer.

7. The cartel in form of middlemen has been abolished now.

8. Promoting competition in the market by increasing the number of players and abolished the monopoly power being abused by mandi players.

9. Central Government to act as a watchdog and almost zero State interference.

10. Disputes to be solved by SDM than Civil Courts, this move has almost zeroed the physical harassment of the farmers in terms of case hearings and minimised the cost of litigation and also time frame has been cut for dispute solution.

11. Linking of insurance and credit schemes of the Government will be an added advantage.

12. The induction of state of the art technology will be possible with ease. This will improve the productivity of the farms and will save time.

13. FDI seems to be more feasible and possible to foster the productivity of agriculture produces.

14. This bill will facilitate agriculture to increase its share in the GDP contribution of the country.

15. This will help the economy to increase not only the GDP but also PPP because the economy will witness the upliftment of the economic status of the real poor people in the economy.

16. Saving of precious life of farmers in forms of the human capital of the economy.

17. Now if the produce is destroyed by the act of god then the farmer will not be in a total loss as a minimum guaranteed price will be paid by the buyer.

The Endnote

I remember a program being aired on TV that was showing interviews of real-time small farmers. These farmers were from the Nasik the famous belt of Onion produce in India. The horrifying ordeal of these farmers can be imagined the moment a farmer says, “that babuji my produce is sold for 30 paise a Kilo Gram.” Now just imagine how much such a farmer can earn from a produce? During that onion crisis in the country, I remember people buying onions for Rs. 100 per Kilo Gram! The hell of a difference in the cost and the selling price is the profit being earned by the cartel! Today, in the news it was being flashed that how influential cartel being earning Rs. 10000 crore from the commission of Onion, chilies, and grapes while another big cartel being earning Rs. 5000 crore as commission in another farm produce! Hope to see disinflation in the economy backed by this new bill on one hand and on the other to see improvement in the economic status of these marginal or small farmers. A new path being engineered by the GoI to ensure the prospering small farmers so that none commits suicide! Indeed the dream of 1 trillion USD of Indian Economy by the present Prime Minister of India to be a bit nearer with the passing of this bill 2020, a starting of a new era in the agriculture field!